What is 3-statement financial model? How to build it

Three Statement Financial model is one of the most popular financial models that is built based on the three financial statements below using data in the past and assumptions for the future to forecast or project the financial position of a company as a whole.

Why the 3-statement financial model is needed

Having a functional 3 statement model allows investors and managers alike to evaluate a business’s historical financials, compare those to the firm’s ongoing concerns, and project performance into the future. This introductory model lays the foundation for all other financial models (i.e DCF, CCA, M&A).

When a 3-statement financial model should be built?

The 3-statement financial model should be built as soon as possible. Typically, startups build a model from day one and continuously refine it throughout the formation and development of the business thereafter.

The model should also be built or rebuilt when the business want to consider for a new business oppotunity or changing business model. This help the managers or the alike to assess the impact of changing.

Who needs a 3-statement financial model

  • Business owners to validate
  • Business managers or the alike (e.g. CEO, CFO, COO, etc)
  • Investors

How to build a 3-statement financial model

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